LONDON Jan 28 (Reuters) - Chilean mining firm Antofagasta
said on Wednesday it expects a smaller-than-expected
increase in production this year after posting annual output for
2014 in line with its guidance.

Like its peers, the London-listed copper miner faces falling
ore grades and rising costs and has been hit by a recent plunge
in the price of copper, down 13 percent this year.

The Chilean miner said it expects production of about
710,000 tonnes of copper in 2015, slightly below analysts
forecasts, at net cash costs of $1.50 per pound.

"This is unlikely to give any confidence to the investors,
(who) in our view, were expecting annual improvement in unit
costs due to a weak Chilean peso and lower oil prices," Citi
analysts said in a note. "(The) market could react negatively on
today's results."

Majority-owned by Chile's Luksic family, Antofagasta
produced 704,800 tonnes of copper in 2014, down 2.3 percent from
the previous year, also due to lower grades at its Los Pelambres
mine but in line with its 700,000 tonnes target. Net cash costs
for the year at $1.43 per pound were 5.1 percent higher than in
2013 but slightly better than the company $1.45 target.

To battle a fall in production due to aging mines and
declining grades, Antofagasta is focusing on its $1.9 billion
Antucoya greenfield project, which is expected to come on stream
this year, and other brownfield expansions. It hopes a $3
billion investment over five years will allow it to grow its
output to 900,000 tonnes by 2018.
(Editing by David Holmes and Jason Neely)